Flexible spending accounts can now allow carryover of up to $500 to following year

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HRS Insight

The IRS has amended its rules for healthcare flexible spending accounts (FSAs) to permit participants to carry over up to $500 per plan year rather than forfeit all unused funds under the traditional ‘use or lose’ rules. FSAs are currently allowed to permit participants to apply unused funds at the end of the plan year to expenses incurred during a 2 ½ month grace period following the end of the plan year. IRS Notice 2013-71 provides that employers can offer either the carryover or the grace period alternative, but not both. Employers are not required to offer either alternative.